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Toward Productive, Inclusive, and Sustainable Farms and Agribusiness Firms

Chapter 3 | Effectiveness of Activities in Improving Productivity, Inclusion, and Sustainability

The World Bank Group has generally been effective in contributing to agrifood system development by increasing productivity, sustainability, and inclusion of farms and agribusiness firms. However, important gaps remain across sectors and regions, especially in fragile and conflict-affected countries.

The World Bank has been relatively effective in improving the production and productivity of major staple cereals and livestock (poultry, dairy) and in leveraging institutional innovations (such as productive alliances and cooperatives) for improving the inclusion of smallholder farmers and small and medium enterprises into agrifood value chains. It has also been effective in promoting the uptake of climate-smart practices and food safety and environmental standards. However, challenges remain in all outcome areas in low-income countries, especially in Western and Central Africa, in countries at traditional stages of agrifood system development, and in less-favored areas, such as rainfed zones and those inadequately integrated with markets.

The agribusiness investments of the International Finance Corporation in support of agrifood system development contributed to increased productivity, but integrating smallholder farmers and small and medium enterprises into value chains remains a challenge. International Finance Corporation investments also face challenges in complying with environmental and social standards.

Bank Group interventions that target all three outcomes (productivity, sustainability, and inclusion) perform as well as or better than those that target one or two outcomes, showing that generating system-level effects is possible, despite potential trade-offs.

Bank Group interventions use a variety of approaches—including innovation, demonstration, and strengthening institutional capacity—to build on results and increase impact. However, promising pilots in low-income countries that increase yields or demonstrate sustainable practices (such as climate-smart agriculture) face challenges with scaling results because of difficulties in replicating models.

The recently established Agribusiness Sector Working Group has made significant progress in defining the strategy and cross-cutting themes for World Bank, International Finance Corporation, and Multilateral Investment Guarantee Agency collaboration. Despite positive examples, current collaboration remains largely informal, bilateral, undocumented, and difficult to trace and evaluate in the portfolio.

In this chapter, we examine the effectiveness of Bank Group agrifood system projects that aim to improve productivity, inclusion, and sustainability. The chapter includes evidence from our analysis of evaluative evidence of World Bank agrifood projects (across Global Practices) and IFC investments and advisory projects, supplemented by analysis of the KPI database, case studies, and review of external evidence (through structured literature reviews). Our analysis of the effectiveness of IFC investments focuses on IFC’s direct investments in agribusiness development.1 The project-level analysis covers the three dimensions of agrifood system development (productivity, inclusion, and sustainability). Our analysis does not, however, include an assessment of the complementarities among different projects that may have potential sector- or economywide effects. In chapter 4, we complement this chapter by identifying the factors that have influenced the effectiveness of Bank Group interventions.

The full portfolio consists of more than 1,600 Bank Group interventions approved during the evaluation period (FY10–20), with total financing of $50.5 billion. Of these, 609 were World Bank investments, 331 were IFC investments, 210 were IFC advisories, and 21 were MIGA guarantees. The World Bank’s ASA portfolio consists of 495 projects. However, our effectiveness analysis excludes these projects because there is no self-evaluation system that would allow us to validate completion reports. About 77 percent of the closed World Bank lending operations, 37 percent of operationally mature IFC investments, 40 percent of closed IFC advisory, and 31 percent of operationally mature MIGA projects had Independent Evaluation Group (IEG) evaluative evidence at the time of preparation (table 3.1). Appendix B provides a more detailed description of the portfolio.

Table 3.1. World Bank Group Agrifood System Portfolio (approved fiscal years 2010–20)

Projects (no.)

Commitment Type

All

Active

Closeda

IEG-evaluated

Commitment

(US$, millions)

Projects or investments

940

491

449

290

49,459

World Bank projects

609

298

311

239

39,932

IFC investments

331

193

138

51

9,527

Analytic and

advisory activities

705

138

567

36

568

World Bank ASA

495

17

478

n.a.

152

IFC advisory services

210

121

89

36

416

MIGA guarantees

21

8

13

4

474

Source: Independent Evaluation Group.

Note: World Bank projects include agrifood lending activities by several Global Practices. ASA = advisory services and analytics; IEG = Independent Evaluation Group; IFC = International Finance Corporation; MIGA = Multilateral Investment Guarantee Agency; n.a. = not applicable.

a. “Closed” for World Bank and IFC advisory services projects; for IFC investments and MIGA guarantees, “not active” and/or “operationally mature.”

Overall Effectiveness

World Bank projects targeting productivity, inclusion, or sustainability were effective overall in supporting agrifood system development. The World Bank was generally effective in increasing the adoption of improved inputs and sustainability-enhancing practices, narrowing yield gaps, and raising the market access and productivity of farmers and SMEs. Overall, 72 percent, 71 percent, and 78 percent of evaluated World Bank projects targeting productivity, inclusion, and sustainability, respectively, were rated successful (moderately satisfactory or above; table 3.2). This performance is comparable to the Sustainable Development Practice Group, which has 73 percent of projects rated successful.

Table 3.2. World Bank Projects by Outcome Category, Income Group, and Institution

Share of Evaluated Projects Rated MS+ (%)

Outcome

Evaluated Projects

(no.)

Income classification

Institution

All

LIC

LMIC

UMIC

IDA

IBRD

Productivity

236

70

71

75

68

76

72

Inclusion

140

71

68

81

66

81

71

Sustainability

109

72

87

76

73

82

78

Source: Independent Evaluation Group.

Note: IBRD = International Bank for Reconstruction and Development; IDA = International Development Association; LIC = low-income country; LMIC = lower-middle-income country; MS+ = moderately satisfactory or above; UMIC = upper-middle-income country.

a. This row reports on the total number of projects evaluated. Individual projects could target multiple outcomes.

However, some effectiveness gaps remain in LICs, lower-middle-income countries (LMICs), and countries at the traditional stage of agricultural development; the Western and Central Africa Region experiences major gaps. Performance on productivity, inclusion, and sustainability outcomes was slightly lower in LICs, International Development Association (IDA) countries (table 3.2), and countries at the traditional stage of agrifood system development (table 3.3). (For a definition of the stages of agrifood system development, see box 3.1.) Project performance was particularly low in Western and Central Africa, with success rates in the range of 44–49 percent for the different outcomes (table 3.3).

Table 3.3. World Bank Projects by Outcome Category, Stage of Agrifood System Development, and Region

Share of Evaluated Projects Rated MS+ (%)

Outcome

Evaluated Projects

(no.)

AFSD stage

Selected Regions

Traditional

Transitional

Integrated

AFE

AFW

SAR

All

Productivity

236

70

76

73

78

49

87

72

Inclusion

140

68

79

77

77

49

86

71

Sustainability

109

67

88

84

81

44

100

78

Source: Independent Evaluation Group.

Note: AFE = Eastern and Southern Africa; AFSD = agrifood system development; AFW = Western and Central Africa; MS+ = moderately satisfactory or above; SAR = South Asia.

a. This row reports on the total number of projects evaluated. Individual projects could target multiple outcomes.

Box 3.1. The Three Stages of Agrifood System Development

Agrifood systems tend to pass through the following three major developmental stages:

Traditional: The traditional stage is typical of agrarian economies (World Bank 2007), in which incomes are still low and a large share of the population relies on agriculture and lives in rural areas. Most rural households are not integrated into markets, and production is mainly for home consumption. Short supply chains prevail with limited coordination. Production relies heavily on family labor, with little use of capital or quality and safety standards.

Transitional: In the transitional stage, income levels have started to rise, a growing share of the population has migrated to towns, and nonfarm income sources have increased in importance. Food production methods are becoming increasingly sophisticated, making greater use of purchased inputs and replacing labor with capital. Supply chains tend to be longer to deliver food from the countryside to urban centers. Production is more diversified, and consumption of high-value foods such as meat, fish, dairy products, and fruits and vegetables rises. Application of food quality and safety standards is common.

Integrated: The integrated stage is prevalent in highly urbanized or industrialized economies, in which a large share of the population has achieved middle-income status, lives in cities, and no longer relies on agriculture for its livelihoods. Food production methods have become highly sophisticated; in many cases, they are dominated by specialized agribusiness firms with the resources and know-how to take advantage of cutting-edge global technologies. Long supply chains deliver food to urban populations. Environmental sustainability standards and food quality and safety control are in high demand.

Sources: McCullough, Pingali, and Stamoulis 2008; Morris, Sebastian, and Perego 2020; Reardon et al. 2019.

Efforts to close productivity gaps, improve inclusion, and increase resilience for farmers and SMEs in LICs and IDA countries, especially in Western and Central Africa, face constraints that undermine their success. These include underdeveloped supply chains and irrigation systems, inadequate infrastructure, weak midstream value-adding sectors, ineffective extension services, weak producer groups, and high risks resulting from climatic shocks, fragility, and conflict.

IFC agribusiness investments and advisory services also contributed to boosting productivity, but IFC investments faced challenges in fostering inclusion and implementing E&S standards. To measure success across the three dimensions, we took the IEG ratings of the relevant projects as per the IEG-validated Extended Supervision Reports for IFC investments and Project Completion Reports for IFC advisory projects. As the project evaluation systems of both IFC investments and advisory services are conducted on a sample basis, the ratings presented in the next section are not statistically representative. IFC investments had positive results, even in LICs and countries at the traditional stage of agrifood system development. Almost all evaluated advisory services projects supported productivity growth, but performance was lower in LICs and countries at the early stages of agrifood system development. Although IFC’s agribusiness investments overall had a positive record in boosting market integration, the inclusive business investments faced challenges in fostering inclusion and integrating smallholder farmers and SMEs into value chains. Also, more than one-third of IFC agribusiness investments did not meet IFC’s E&S requirements.

Productivity

World Bank

The World Bank was generally effective in increasing the adoption of improved inputs, narrowing yield gaps, and raising the production and incomes of farmers and SMEs. Productivity is enhanced when producers can adopt improved technologies and have access to markets and when farmers have access to small-scale irrigation. Almost all evaluated World Bank projects (n = 239) supported productivity improvements, whether through technology-led (supply-side) interventions, market-led (demand-side) interventions, or a mix of both. About 72 percent of closed projects targeting productivity were successful. In addition, about 80 percent of productivity-related KPIs (for example, percentage increase in yield, marketed volume, or net income) were attained. The World Bank was most successful at improving the productivity of major staple cereals (rice, wheat, and maize) and livestock (dairy and poultry), often prioritized by countries for national food security. Investments in farm production inputs (such as improved seeds, fertilizers, and livestock feed) and in technologies and improvements in market links increased incomes for producers.

The World Bank’s interventions aimed at increasing productivity were less effective in LICs, LMICs, and countries at the traditional stage, especially in Western and Central Africa. Generally, interventions in LICs and LMICs (70–71 percent moderately satisfactory or above [MS+]) and countries at the traditional stage of agrifood system development (70 percent) were less effective than those in UMICs and countries at the transitional stage (75–76 percent; tables 3.2 and 3.3). Interventions in Western and Central Africa (49 percent MS+) were considerably less effective than those in Eastern and Southern Africa (78 percent). The effectiveness of development policy operation in Western and Central Africa, which accounted for about half of the Western and Central Africa portfolio, was 29 percent.2 Low project effectiveness partly reflects the difficult conditions that these countries face, especially those in fragile, conflict, and post-conflict situations. For example, only about half of the maize area in Africa is planted using modern seeds (compared with 90 percent in South Asia and more than 60 percent in Latin America). Average fertilizer use in Sub-Saharan Africa is the lowest in the world—11 kilograms per hectare, compared with 150 kilograms per hectare in South Asia and 72 kilograms per hectare in Latin America (Fuglie et al. 2020; Langyintuo 2020).3 Project design and implementation factors (for example, targeting and implementing capacity) are also key. A review of a sample of unsatisfactory projects (n = 17) implemented in LICs, including 10 in Western and Central Africa, showed that project effectiveness is often limited by (i) underdeveloped or largely ineffective extension and service delivery systems; (ii) deficient infrastructure and weak supply chains that increase transaction costs to producers and service providers; (iii) underdeveloped processing activities to create better market opportunities for producers; (iv) limited capacity of producers and farmer groups to deal with complex value chains that require meeting certain standards; (v) policy constraints, including access to land and finance for farmers and SMEs; and (vi) climate, epidemic, and conflict-induced shocks (in some countries). These findings are consistent with existing studies (Barrett et al., forthcoming; de Brauw and Bulte 2021; Langyintuo 2020; World Bank 2007). The Liberia Tree Crop Revitalization project experienced some of these issues (box 3.2).

Box 3.2. Liberia Smallholder Tree Crop Revitalization Support Project

As part of a post-conflict regeneration of Liberia’s agriculture commodity sector, the Tree Crop Revitalization Support investment project aimed at revitalizing four export tree crops (cocoa, coffee, oil palm, and rubber) by providing access to finance, inputs, technologies, and markets to smallholders growing these crops. However, the project did not reach its objectives. Unsuccessful project aspects include the following:

  • Outgrower programs were not established;
  • Cooperatives supported by the project were unable to access markets;
  • The government was unable to secure long-term credit to growers of oil palm and rubber (which require four to six years after planting before harvesting);
  • Unmitigated risks made it difficult to establish partnerships with commercial banks to provide credit to allow farmers to maintain tree crops on the farm.

Source: Independent Evaluation Group.

The World Bank has supported innovative efforts to increase productivity in LICs and countries at the traditional stage, but these efforts have not helped close yield gaps, especially in rainfed and less-favored production environments in Africa. World Bank projects helped improve yields in the geographic areas targeted by its interventions, including LICs and countries at the traditional stage of development, as evidenced by the success rates of the productivity projects (table 3.2). Crop yields, however, remain low at the national level in LICs (figure 3.1), including in Africa and less-favored areas such as rainfed regions with insufficient market access where adoption of improved seed varieties and other inputs has been low (Fuglie and Marder 2015).4 For example, the Kenya Agricultural Productivity and Agribusiness Project aimed to revitalize the public extension system through contracted private service providers and increased access to inputs and services. The intervention led to an increase in the yields of several products in pilot areas, including milk, honey, maize, sorghum, and beans. However, the model could not be replicated or expanded widely because farmer cooperatives and common interest groups could not pay for contracted service providers after project closure, except in the case of some high-value products such as dairy.

Figure 3.1. Cereal Yields by Country Income Group and Region

Image
Horizontal bar graph showing client-facing tasks are easier in country and knowledge tasks are easier in headquarters.

Figure 3.1. Cereal Yields by Country Income Group and Region

Image
Horizontal bar graph showing client-facing tasks are easier in country and knowledge tasks are easier in headquarters.

Source: Independent Evaluation Group, based on World Bank Development Indicators database.

International Finance Corporation

All the IFC agribusiness investments that we evaluated aimed to increase productivity. The main purpose of IFC agribusiness investments is to modernize or expand the capacity of productive assets in agribusiness (for example, investments in processing facilities or storage). Using the IEG ratings for business success as a proxy for productivity, 60 percent of these agribusiness projects increased productivity, which is higher than the average for the Manufacturing, Agribusiness, and Services (MAS) portfolio (44 percent) and the MAS nonagribusiness portfolio (33 percent).5 IFC investments that succeeded in increasing productivity were designed based on good understanding of the market and stress testing during due diligence that considered adverse exogenous factors that could affect the use of the productive assets.

Although the number of evaluated projects does not allow us to make definite assessments, IFC agribusiness investments boosted productivity, even in countries at the traditional stage of agrifood system development. We assessed 35 projects, of which 4 were in LICs and 6 in traditional countries. The majority (75 and 67 percent, respectively) were successful in lifting productivity (table 3.4). For example, an East African dairy operation in a LIC, supported through an IFC investment and advisory successfully ramped up its farm and firm operations, increased the firm’s capacity use, and achieved better prices because of increased production quality. Further analysis showed that investments in animal protein and primary agricultural production have greater success in achieving productivity improvements. However, packaged food and beverages lag.

Table 3.4. International Finance Corporation Agribusiness Investments by Outcome Category, Stage of Agrifood System Development, and Income Classification

Share of Evaluated Projects Rated MS+

(%) [no. evaluated projects]

Outcomeb

All

By AFSD stagea

By income classificationa

Traditional

Transitional

Integrated

LIC

LMIC

UMIC

Productivity

60 [35]

67 [6]

100 [1]

53 [17]

75 [4]

50 [8]

67 [18]

Inclusion

66 [35]

83 [6]

100 [1]

59 [17]

75 [4]

63 [8]

61 [8]

Inclusive business

55 [11]

100 [4]

0 [0]

40 [5]

100 [3]

50 [2]

40 [5]

Sustainability

59 [34]

50 [6]

100 [1]

63 [16]

25 [4]

63 [8]

65 [17]

Source: Independent Evaluation Group.

Note: Country classification details are as in table 3.3. AFSD = agrifood system development; LIC = low-income country; LMIC = lower-middle-income country; MS+ = mostly successful or better; UMIC = upper-middle-income country.

a. Since some countries cannot be classified, the number of projects by AFSD stage does not sum to the total.

b. The project rating for business success was used as a proxy for productivity; similarly, private sector development was used as a proxy for inclusion, and environmental and social was used as a proxy for sustainability.

c. This row reports on the development outcome rating for all projects evaluated.

Almost all evaluated IFC advisory services projects supported productivity growth, and many were effective, but performance was lower in LICs and countries at the traditional stage of agrifood system development. More than two-thirds (68 percent) of IFC advisory services successfully contributed to productivity objectives (table 3.5), well above the three-year average of IFC advisory services (40 percent) and IFC MAS advisory services (55 percent).6 However, IFC advisory services projects achieved lower ratings in LICs and in countries at the traditional stage, largely because of weaker firm-level capacity in LICs. Case study evidence suggests that IFC’s advisory services complemented its agrifood system investments by providing capacity building before or in parallel with the investment.

Table 3.5. International Finance Corporation Advisory Services by Outcome Category, Stage of Agrifood System Development, and Income Classification

Share of Evaluated Projects Rated MS+

(%) [no. evaluated projects]

Outcome

All

By AFSD stage

By income classification

Traditional

Transitional

Integrated

LIC

LMIC

UMIC

Productivity

68 [34]

50 [10]

88 [8]

64 [11]

40 [5]

74 [19]

70 [10]

Inclusion

67 [27]

33 [6]

88 [8]

67 [9]

25 [4]

73 [15]

75 [8]

Sustainability

73 [15]

0 [2]

100 [4]

80 [5]

0 [2]

83 [6]

86 [7]

Source: Independent Evaluation Group.

Note: Country classification details are as in table 3.3. AFSD = agrifood system development; LIC = low-income country; LMIC = lower-middle-income country; MS+ = mostly successful or better; UMIC = upper-middle-income country.

a. This row reports on the complete portfolio of projects evaluated. Individual projects could target multiple outcomes.

Inclusion

World Bank

The World Bank has been effective in improving the inclusion of smallholder farmers, cooperatives, and SMEs in income-generating agrifood-related activities. About 58 percent of IEG-evaluated projects (n = 140) aim to enhance inclusion, defined mainly as increased access and participation of smallholder farmers and SMEs in agrifood-related production and market activities. When possible, we have assessed inclusion of women, but we have not evaluated inclusion of other specific groups, such as young people or vulnerable beneficiaries, because of limited data. About 71 percent of the inclusion projects achieved their objectives (table 3.2). In addition, the analysis of the KPIs showed that 79 percent of inclusion-related indicators (for example, female entrepreneurs receiving matching grants, or SMEs trained in processing) were fully achieved. The World Bank has been particularly successful in improving the access of smallholder farmers (including women) and SMEs to knowledge, finance, inputs, technologies, equipment, and markets. The increased participation of farmers and SMEs in more productive activities (such as processing, logistics, and marketing) also provided income benefits for these groups.

However, the World Bank has been less successful at integrating smallholder farmers and underserviced groups in less favorable regions. Case studies show that targeting poor people and farmer groups facilitated horizontal coordination among farmers,7 participation of smallholder farmers in markets, and ties with SME input and service providers and agribusiness firms. In India, the National Dairy Support Project included activities to support equity, inclusiveness, and participation; facilitated diversification of agriculture into high-value dairy production; and supported integration of small-scale rural milk producers into organized milk value chains. This effort benefited 3.7 million milk producers, including 744,000 women and more than 1.1 million small and marginal farmers and minorities. Similarly, the Integrated Agricultural Productivity Project (IAPP) in Bangladesh helped double the productivity of milk of smallholder crop-livestock farmers, thereby increasing own milk consumption by 96 percent while boosting their milk sales fourfold and their earnings fivefold. However, a case study of the Kenya Agricultural Productivity and Agribusiness Project showed that farmer groups and service providers were less effective in integrating farmers in less-favored regions (such as drought-prone areas and those with underdeveloped markets), especially for low-value commodities (for example, sorghum and maize in Kenya).

The World Bank was also less successful in promoting inclusion in countries at early stages of agrifood system development. The portfolio review showed that the average effectiveness of World Bank inclusion interventions was lower in client countries in the traditional stage (68 percent) than in countries in the transitional stage (79 percent; table 3.3). Effectiveness at inclusion was also lower in the Western and Central Africa Region (49 percent) than in Eastern and Southern Africa (77 percent) or South Asia (86 percent). The World Bank was also less effective in LICs (71 percent) and LMICs (68 percent) than in UMICs (81 percent) and less effective in IDA countries (66 percent) than in International Bank for Reconstruction and Development countries (81 percent; table 3.2).

International Finance Corporation

Generally, IFC’s agribusiness investments had a good record on market integration—that is, including actors in value chains. This evaluation could not assess IFC’s effectiveness in supporting financial inclusion because only seven investments in the relevant portfolio had been evaluated. Relatively high private sector development outcome ratings (66 percent) suggest generally satisfactory results regarding market integration (building and expanding value chains), including in LMICs and LICs (table 3.4), although these ratings are not statistically representative for the entire agribusiness portfolio in these countries. IFC investments that were successful at including actors into value chains were designed to reflect the needs of these actors and, at times, included simultaneous support on access to finance. Inclusion in value chains can be facilitated by digital solutions that allow for better information flow across actors, such as price information between aggregators and smallholder farmers (Pouw, Bush, and Mangnus 2019). For example, through IFC’s support to a cocoa supply chain in an LMIC in Western Africa, 62 cooperatives with 60,000 farmers were able to lease 132 new trucks, allowing these cooperatives to enter the supply chain and build credit histories.

IFC’s inclusive business investments faced challenges in integrating smallholder farmers and SMEs in agricultural value chains. Of all agribusiness investments in support of agrifood system development, 35 percent were inclusive business investments, which work with the poorest people (sometimes referred to as the “base of the pyramid”). Only 55 percent of these investments were rated successful, compared with 66 percent for the remaining agribusiness portfolio. This is expected, given the high risk of the countries in which the poorest people live. Lower private sector development ratings of 55 percent versus 66 percent for the remaining agribusiness portfolio suggest difficulties with the market integration of small actors, who often face challenges in meeting required quality and efficiency standards.

A particularly severe challenge for inclusive business investments is to remain financially viable. Only 45 percent of inclusive business projects were rated successful with respect to business results, compared with 67 percent for the rest of the portfolio. These lower business success rates suggest that it is difficult for lead firms to integrate smaller actors into value chains while maintaining efficiency, reliability, and quality to compete in commercial markets. Many small actors operate informal businesses before accessing value chains, face challenges with achieving quality standards, lack managerial capacity, or engage in side selling when the spot market price exceeds the contracted one. Other factors (such as whether farmers perceive themselves to be treated fairly by the company or value a long-term stable relationship with it) also play a role (World Bank 2018b).

About three-quarters of IFC advisory services supported inclusion activities, and two-thirds were rated in the satisfactory range, but projects in LICs and countries at the traditional stage were less successful. The overall success rate of IFC advisory services on inclusion (67 percent) was similar to the productivity outcome (68 percent). Although ratings are not statistically representative, those advisory services that were evaluated were less effective in achieving inclusion targets in LICs (25 percent) and countries at the traditional stage (33 percent; table 3.5). The successful projects contributed to inclusion through building the capacity of firms, farmers, and cooperatives to reach markets and integrate into supply chains.

Sustainability

World Bank

The World Bank has contributed to enhancing sustainability through its support for the increased uptake of public food safety standards and technical environmental practices. About 45 percent of IEG-evaluated projects achieved sustainability outcomes, and 78 percent of these projects were rated in the acceptable range (MS+; table 3.2).8 The effectiveness of sustainability projects was lower in countries at the traditional stage (67 percent) than in those at the transitional stage (88 percent) and lower in Western and Central Africa (44 percent) than globally (78 percent). A large share of sustainability projects that focused on supporting climate-smart agriculture, management of natural resources and resource efficiency (for example, using less land and water), and food safety or environmental standards were successful. In addition, 82 percent of KPIs related to food safety and environmental sustainability standards (for example, farms and firms adopting sustainable practices or compliant with food safety or environmental standards) were achieved.

Although World Bank projects demonstrated sustainable practices (climate-smart or food safety standards), their wider adoption was limited in LICs, pointing to the difficulties of scaling up. The conditions for adoption of climate-smart practices that generate benefits in all three outcome dimensions (productivity, inclusion, and sustainability) are often highly context- and location-specific (FAO 2021). Adoption of sustainable practices is enhanced when trade-offs are minimized, and interventions demonstrate tangible economic benefits to incentivize behavioral changes. Where there are competing objectives or trade-offs in expected benefits, addressing the limiting factors and aligning incentives is key to increasing climate-smart investments (World Bank Group 2015b). For example, an impact evaluation of the Rwanda Land Husbandry, Water Harvesting, and Hillside Irrigation Project showed that adoption of climate-smart practices by beneficiaries in project areas remains low. Only one in four plots of beneficiary households are irrigated, and adoption has not increased over time, affecting the scalability of the interventions. Uptake of labor-intensive irrigation was limited by an inability to hire labor or low profitability (Byiringo et al. 2020). A positive example is the Montenegro Institutional Development and Agriculture Strengthening Project. Designed to help Montenegro meet European Union preaccession requirements, this project gave matching grants to eligible farmers and agroprocessors for wider uptake of good agricultural practices and system upgrades. This intervention has enhanced compliance with public food safety standards and ensured scalability of the program.

World Bank support for market-led sustainability standards was prominent where diversification toward high-value sectors or export commodities was feasible. Adoption of more enforceable and scalable market-led or private standards is higher in urbanizing markets and large firms working in high-value products or export-oriented sectors (such as coffee, tea, bananas, avocados, and cocoa). However, the requirement to meet stringent private sustainability standards has often prevented farmers from diversifying production and participating in such high-value sectors. The World Bank Agriculture Sector Support Project in Côte d’Ivoire, implemented in collaboration with IFC, supported smallholders producing export crops through training in good agricultural practices, phytosanitary standards, and establishment of performance contracts to enhance compliance with standards. In India, the National Dairy Support Project supported small-scale dairy farmers and cooperatives and built village-based milk procurement systems with milk quality testing. These interventions allowed small-scale farmers to diversify toward high-value dairy production, increase milk prices, and reduce waste. They created incentives for dairy farmers to meet market-led food safety standards and benefit from the organized dairy value chains, in addition to increasing farmers’ own consumption of milk.

International Finance Corporation

IFC investments with components directly targeting the sustainability of the agrifood system had good levels of effectiveness, rated successful or better. About 21 percent of the portfolio (n = 11) had targeted activities to support climate-smart agriculture or related environmental sustainability, food safety, or resource efficiency. These investments were in Europe and Central Asia, Latin America and the Caribbean, and East Asia and Pacific and attained sound levels of effectiveness (64 percent successful or better, which is higher than the average for the productivity outcome; ratings not reflected in table 3.4).

However, apart from climate-smart agriculture projects, IFC agribusiness investments faced challenges with implementing E&S standards. IFC contributions to sustainability outcomes are assessed by the capacity of IFC investments to comply with the required E&S standards. At the onset of the investment process, IFC agribusiness-related investments trigger a higher share of the eight IFC E&S Performance Standards more frequently than investments in other sectors. They are also slightly riskier than the overall MAS portfolio of investments (that is, they have a higher share of category A and B projects).

More than one-third of evaluated agribusiness projects did not meet IFC’s E&S requirements. The average E&S effects rating for the evaluated agribusiness interventions of the agrifood system portfolio is 59 percent meeting E&S requirements, about on par with the wider agribusiness and forestry sector portfolio as a whole (56 percent). Despite the limited statistical representativeness, this result suggests room for improvement in E&S performance. The average of 59 percent is below the long-term average of 70 percent for IFC (figure 3.2). The E&S performance was weak in countries at the traditional stage of agrifood system development. In LICs, only 25 percent of investments met IFC’s E&S requirements, compared with 63 and 65 percent in LMICs and UMICs, respectively, congruent with an earlier IEG assessment (World Bank 2021a). Even though clients’ E&S performance improved during 2018–19, in line with a better E&S performance of the MAS portfolio, about 40 percent of IFC agribusiness projects still require attention.

Figure 3.2. Environmental and Safety Ratings for International Finance Corporation Agribusiness Investments by Evaluation Year

Image
Horizontal bar graph showing client-facing tasks are easier in country and knowledge tasks are easier in headquarters.

Figure 3.2. Environmental and Safety Ratings for International Finance Corporation Agribusiness Investments by Evaluation Year

Source: Independent Evaluation Group.

Note: AFS = agrifood system; E&S = environmental and social; IFC = International Finance Corporation; MS+ = mostly successful or better.

The recurring issues on E&S performance include challenges related to occupational health and safety, wastewater management, implementation of E&S action plans, and the Bank Group Environmental, Health, and Safety Guidelines. IFC clients have been consistently raising food safety standards in the dairy and grain sector with their state-of-the-art processing plants, continuous introduction of better processing technology, and new high-quality products. However, the clients are yet to develop adequate environmental, health, and safety systems or enhance compliance with the remaining issues on wastewater management practices, use of personal protective equipment, and health and safety conditions for workers.

Nevertheless, several agribusiness investments achieved and even exceeded food safety and E&S standards. Success in meeting E&S standards was associated with existing client capacity and commitment and IFC’s support in strengthening E&S capacity. This was the case, for example, with IFC’s support to an Eastern African grain mill, which showed commitment to E&S issues from the onset of the investment process. After the investments, the milling operation met the relevant IFC Performance Standards and received certification for an international standard defining the requirements for effective control of food safety. Similarly, all E&S standards of MIGA-supported agribusiness intervention in East Africa were satisfactory, proactive, and responsive to MIGA requests.

IFC advisory services also supported firms and farms with improving environmental sustainability. About 40 percent of IEG-evaluated IFC advisory services targeted activities to improve sustainability. Such contributions were embedded in activities that (i) increase the capacity of farms and firms in implementing or complying with food safety standards, and (ii) adopt improved technologies and methods for addressing climate change and sustainability standards. The effectiveness of advisory services in improving sustainability outcomes was 73 percent (table 3.5). Yet no projects in LICs or traditional stage countries reached a satisfactory level because of a lack of firm-level capacity and commitment. To help IFC clients (including investment clients in IDA FCS countries) better meet E&S standards, IFC increased its efforts by establishing in 2019–20 an integrated Environmental, Social, and Governance advisory services program.9

System-Level Effects and Trade-Offs

The Bank Group is increasingly supporting system-level effects through multipurpose interventions that foster the development of more productive, inclusive, and sustainable agrifood systems. System-level effects are defined in terms of projects that integrate all three outcomes (productivity, inclusion, and sustainability). Because the case studies were assessed at a project level in terms of the three outcomes for agrifood system development, actual sector- or economywide effects that may generate additional multipliers in the agrifood economy are not measured. The World Bank has increased its orientation toward targeting more outcomes at once. Multiple targeting was not frequent in the evaluated (older) portfolio because only 56 of 239 projects (23 percent) pursued all three outcomes. By contrast, 205 of 609 projects (34 percent) in the total (more recent) World Bank portfolio did so. For IFC advisory, 32 percent of all projects pursued all three outcomes. Many projects (41 percent) pursued productivity and inclusion outcomes, although only 7 percent pursued productivity and sustainability outcomes.

Interventions that targeted all three outcomes and minimized trade-offs generally performed better than narrower interventions. Evaluated World Bank projects that combined all three outcomes (n = 56) performed at 80 percent MS+, higher than the average of 72 percent (table 3.6). For IFC advisory, evaluated projects that combined all three outcomes (n = 13) also performed better than the average (77 percent MS+ for projects targeting all three outcomes versus 69 percent on average).10 Thus, the one-third of World Bank projects and IFC advisory services targeting system-level effects did so with a higher success rate than projects targeting fewer outcomes. This suggests that projects that bundled all three outcomes (productivity, inclusion, and sustainability) maximized synergies or minimized trade-offs among the outcomes.

Table 3.6. World Bank and International Finance Corporation Advisory Services Projects That Span Combinations of Agrifood System Development Outcomes

World Bank

IFC Advisory Services

Outcome Combinations

All projects

Evaluated projects

All projects

Evaluated projects

Count

(no.)

Share of total

(%)

Count

(no.)

Share with outcomes MS+

(%)

Count

(no.)

Share of total

(%)

Count

(no.)

Share with outcomes MS+

(%)

Productivity

74

12

47

68

31

15

5

80

Productivity and inclusion

200

33

83

65

87

41

14

57

Productivity and sustainability

122

20

50

76

15

7

2

50

All three outcomes

205

34

56

80

67

32

13

77

Other

8

1

3

67

10

5

2

100

Source: Independent Evaluation Group.

Note: IFC = International Finance Corporation; MS+ = moderately satisfactory or above (mostly successful or better).

The case studies provide several examples of projects that combined the three outcomes and made positive contributions at the system level. Of the 11 World Bank cases included in the purposive sample for the case-based analysis, 6 (in Bangladesh, Bolivia, Ethiopia, India, Montenegro, and Vietnam) contributed positively to increasing productivity, inclusion, and sustainability. For example, the Livestock Competitiveness and Food Safety Project in Vietnam helped livestock (chicken and pig) producers build links with slaughterhouses and markets, which increased incomes for farmers and facilitated the uptake of more sustainable practices and public food safety standards by farmers and firms. The Bolivia Rural Alliances Project supported productive farm investments to improve market links and inclusion of farmers, leading to increases in land productivity, revenues, and uptake of sustainable practices. Similarly, of the 6 cases purposively included from the private sector (IFC, MIGA, or both), three contributed positively to productivity, inclusion, and sustainability. These included IFC advisory services to an East African dairy company, providing extension services to farmers and improving food safety while integrating them into the dairy supply chain, and IFC advisory services in support of the cocoa supply chain in West Africa.

Trade-offs are a potential risk in agrifood system-level interventions. Productivity projects, for example, can improve inclusion through better access to and participation of smallholder farmers and SMEs in value chains. However, there could be thresholds beyond which attempts to reach the poorest people will incur costs and reduce productivity. Such a potential trade-off is demonstrated in the case of IFC’s inclusive business projects, which exhibit lower productivity when we look at their business success as a proxy. Similarly, climate-smart agriculture (for sustainability projects) could face challenges in achieving triple-win outcomes (productivity, adaptation, and mitigation) and may require careful analysis of synergies and potential trade-offs under local conditions (FAO 2021).11

The Bank Group has mitigated some of these trade-offs using various instruments and incentives. For the World Bank, these have included matching grants (for example, in Montenegro and Vietnam). The matching grants have allowed farms and firms to upgrade systems to meet food safety standards or improve agricultural practices for climate resilience or managing risks. In addition, IFC has used blended finance as one of its approaches to managing trade-offs and reaching frontier markets. For example, IFC used blended finance in a dairy project in East Africa, which was financed through the Global Agriculture and Food Security Program Private Sector Window.

Improving and Sustaining Results

Bank Group interventions leverage a variety of approaches—including innovation, demonstration, and strengthening institutional capacity—to sustain development outcomes and improve results to increase impact. The technology generation, promotion, and monitoring approach used by the Bangladesh IAPP has been mainstreamed into other agricultural projects (World Bank 2016a). Best practices in hillside irrigation demonstrated by the Rwanda Land Husbandry, Water Harvesting, and Hillside Irrigation Project have influenced the country’s strategic plan for agricultural transformation. Not all interventions are sustained, however. Although the Kenya Agricultural Productivity and Agribusiness Project’s piloting and demonstration of a contracted extension service delivery model contributed to the emergence of private service providers, the model was not sustained except for a few high-value enterprises such as dairy. The farmer groups and cooperatives were weak and unable to sustain or expand the model—only about one-third were active after project closing, with many operating under capacity (World Bank 2018d). This shows that the cooperative approach may not succeed when farmer groups are weak or unable to overcome more complex rural market imperfections (Bijman, Muradian, and Schuurman 2016; Bizikova et al. 2020; World Bank 2018d).

Scaling agrifood system interventions requires long-term strategies and well-designed monitoring and evaluation systems, and incentives to address constraints to scale. Successful interventions are those that plan for and build in growth approaches from the outset, reduce risks, target beneficiaries, and create enabling conditions for transformational change. Because agrifood systems operate within complex social, economic, and ecological settings, expansion also requires long-term strategies, sustained effort, and partnerships to support and cultivate desired behavioral changes (de Janvry, Macours, and Sadoulet 2017; Takahashi, Muraoka, and Otsuka 2020). An example is the World Bank’s long-term engagement in the dairy sector in India, supporting multiple operations through capacity building and investments that created the enabling conditions for nationwide promotion of dairy cooperatives and integration of small-scale producers into organized supply chains. Digital technologies that reduce costs, enhance delivery of optimized information and services to users, and promote evaluation and learning facilitate growth (Koerner et al. 2018; Schroeder, Lampietti, and Elabed 2021). As demonstrated by labor-intensive irrigation in Rwanda, diffusion of climate-resilient practices can be limited by low profitability and other barriers, suggesting the need for additional incentives or interventions to unlock limiting constraints (for example, grants to finance more sustainable investments, such as in the Montenegro and Vietnam projects).

Scaling agrifood system development also requires adapting interventions to the local conditions. The flexibility of the productive alliance approach has improved its scalability. The literature finds that adoption and diffusion of agricultural technologies, practices, and related innovations requires adaptation to local conditions, improvement of the capacity of service delivery actors, and increased access to finance for users to overcome credit constraints (Acevedo et al. 2020; Heiman, Ferguson, and Zilberman 2020; Koerner et al. 2018). Since the early 2000s, more than 20 productive alliance projects have been implemented in Latin America and the Caribbean. Productive alliance projects in Brazil, Colombia, and Central America demonstrated how this model can be adapted to countries at different market and agrifood systems development stages. Since then, the flexible approach has been adapted to support agrifood system development in projects in Asia, Eastern Europe, and Sub-Saharan Africa (World Bank 2016b).

A range of pioneering IFC projects in underdeveloped markets demonstrated the role of the private sector and the scalability of the underlying interventions, producing sectorwide effects.12 Generally, IFC’s agribusiness investments exhibited sound results regarding private sector development, with 68 percent of projects rated successful. This suggests that these investments influenced the market through demonstration effects and by contributing to market integration. For example, IFC support to a dairy firm in East Africa not only strengthened the supply chain of raw milk but also helped diminish perception risks. This raised the confidence of financiers to enlarge its size, leading to financial inclusion. The firm is seen as a role model in the sector, having received awards from industry bodies and the host country’s government.

MIGA guarantees mitigated the political risks to sustainability of development results, but scalability and sectorwide effects were limited by low demand for political risk insurance in the agribusiness sector. MIGA guarantees for agribusiness companies in LICs (for example, in East Africa) contributed to supporting the flow of foreign direct investment to IDA countries. However, there is no evidence of adoption of promoted practices beyond the project. The scalability or replicability of the approach is limited by the low demand for political risk insurance in the agribusiness sector, which tends to be smaller compared with other risks.

World Bank Group Collaboration

The Bank Group has recognized the need for collaboration to mobilize private finance and increase results to achieve sectorwide or system-level outcomes. In 2019, it established the Agribusiness Sector Working Group to “serve as [a] mechanism to drive operational connections among World Bank, FCI [Finance, Competitiveness, and Innovation Global Practice], IFC, and MIGA operations” (World Bank 2020a). This working group aims to deliver on the Maximizing Finance for Development approach and apply creating markets initiatives consistently across the agribusiness sector. Key interviews with IFC, World Bank, and MIGA staff indicated that collaboration has improved and has been moderately effective, especially at improving knowledge sharing and laying the foundations for improved alignment. At the strategic level, the working group is moving in the right direction, including joint presentations to the Board and identifying several scalable cross-cutting themes (for example, SME financing, smallholder farmer development, irrigation, food safety, and food loss) as priorities for collaboration to drive agribusiness development.

However, Bank Group collaboration remains largely informal and bilateral and is hard to identify and assess in the portfolio. Operational collaboration takes different forms: cofinancing, collaborative sequencing, or coordinating related parallel projects (World Bank 2017f). Interviews indicated that collaboration remains largely bilateral (IFC with World Bank and IFC with MIGA), rarely connecting all three institutions at the operational level.13 The existing bilateral collaboration is also difficult to find in the portfolio. A flag for joint operations in the World Bank’s Business Intelligence portal does not provide details on the type of collaboration or counterpart projects (product combinations) from IFC and MIGA. Current collaboration is also inadequate for facilitating higher-level strategic alignment and operational connections at the country level. The Agribusiness Sector Working Group lacks a coordinator or secretariat to facilitate knowledge flow, set agendas, or monitor progress. Interviews raised the need for the working group to improve touch points across Global Practices while enhancing coordination with IFC and MIGA. World Bank internal collaboration has improved since the realignment, with regional directors playing a facilitating role.

Contributions to agribusiness development are stronger when collaboration is planned and happens as part of the country strategy. About two-thirds of the sampled CPFs and CPSDs refer to opportunities for joint Bank Group response in the agribusiness sector. Collaborative activities in Rwanda and Mali provide examples. In Rwanda, IDA, IFC, and MIGA instruments were used to support a long-term development plan for promoting commercialization of agriculture. IFC and MIGA support for a grain milling firm made significant contributions to agribusiness development. In Mali (the world’s second-largest producer of shea nuts), most shea nuts are sold raw or processed locally into low-quality artisanal shea butter. The Mali CPF supports a joint IDA-IFC business plan, whereby IFC, with funding from the Private Sector Window of the Global Agriculture and Food Security Program, is helping to build the country’s first shea butter processing plant, and the World Bank is providing competitive grants to shea cooperatives linked to the processing company.

  1. Our analysis excludes investments in related sectors because we lack evaluative evidence.
  2. Some of the factors associated with the weak performance of development policy operations were weak prior actions to influence outcomes and low government capacity or ownership to implement complex policy reforms. The share of projects below the line for quality at entry (62 percent) and government performance (65 percent) was higher for development policy operations than investment project financing—that is, 40 and 23 percent, respectively. See further discussion in chapter 4 (box 4.1).
  3. The average fertilizer use for Sub-Saharan Africa (2010–18) was 16 kilograms per hectare, which compares with 149 kilograms per hectare for Latin America and the Caribbean, 161 kilograms per hectare for South Asia, and 135 kilograms per hectare globally (World Bank indicator data, https://data.worldbank.org/indicator/AG.CON.FERT.ZS?name_desc=false).
  4. Average cereal yields (2010–17) in low-income countries and in Sub-Saharan Africa are less than half of those in lower-middle-income countries and in South Asia and one-quarter of those in high-income countries (figure 3.1, panel a). Although cereal yields grew by more than 1–2 percent annually in other Regions, yields in Sub-Saharan Africa and low-income countries remained almost unchanged (growing by only 0.24 percent annually). Yields in Sub-Saharan Africa are even lower for major dryland crops (such as sorghum, millets, and cassava) or legumes (such as beans and groundnuts) grown in less-favored areas (rainfed or lacking market access; FAO 2021).
  5. The project-level financial efficiency, as assessed under “business success” in project-level evaluations, was taken as a proxy for productivity. The business success of an investment project relies on the productivity of the firm’s assets, making this a useful proxy for productivity.
  6. International Finance Corporation advisory services support firms and farms with becoming more productive through technology-led productivity, market and financial inclusion, and market-led productivity.
  7. Farmer groups include common interest groups and cooperatives (as in Ethiopia and Kenya), productive alliances (as in Bolivia and Peru), and water user associations (as in Bangladesh and Rwanda).
  8. Because the evaluated projects provide no data on actual impacts in relation to climate resilience, mitigation, or environmental sustainability outcomes, the effectiveness of these activities is assessed in terms of uptake of sustainability standards or practices.
  9. However, the Independent Evaluation Group cannot express an opinion on the effectiveness of this program because it is just being implemented.
  10. We did not carry out this analysis for International Finance Corporation investments because most pursue all three outcomes.
  11. Studies find examples of both synergies and trade-offs, which indicates that the realization of synergies (triple wins) is strongly location- and context-specific (FAO 2021).
  12. Sectorwide effects are those that affect all of a particular sector (such as the poultry or dairy sector) in a given country.
  13. The interviewees emphasized that agribusiness is a difficult sector for political risk insurance because of small and fragmented value chains, limiting the agency’s ability to collaborate widely. Hence, agribusiness is a low-margin and small business area for the Multilateral Investment Guarantee Agency; it has the lowest gross exposure. This limits a trilateral collaboration across the World Bank Group.